Rent control is bad news for all UK tenants and buy to let landlords. It’s an easy thing to blame landlords for rising rents, but the bigger problem is we don’t have enough properties in the UK. Landlords are leaving the industry due to so much red tape, which means less rental stock and rising prices. In Scotland, they have already put in place rent caps. Landlords left the market meaning even fewer properties to rent which did not fix the crisis.

The effects of rent control on housing markets and tenants are the subject of recent study that provides light on these topics. In the short term, rent control could seem to benefit the current tenants, but in the long run, it reduces affordability, encourages gentrification, and has negative effects on the community.

What is Rent Control? 

Rent control refers to a privately rented property having a maximum rent fixed. Rent control is in place for statutory and protected tenancies as well as unfit private rentals that started after 1 April 2007.

Rent Control Is Bad News

Legal procedures known as “rent controls” provide authorities the right to regulate rent levels or cap the  level of growth. Limiting rent and limiting price rises are the three basic methods.  rent or a temporary rent freeze.

In the UK, private renters are said to pay 23% of their income as rent. This increases to about 40% in London, where tenants are expected to spend a larger percentage of their income on housing than anyplace else in the nation. Rent increases are accelerating at their quickest rate in five years, according to recent reports. This largely reflects the state of the housing market, which has seen record-breaking price growth despite the pandemic.

Impact of Rent Control on Investment: 

Then what the effects of such a policy would be on residential investment a market that includes the growing build-to-rent market?

Many landlords and investors, as well as the British Property Federation, are against rent control. They argue that the decline in institutional investment in private rented housing in the UK was principally caused by the rent controls implemented in the 1960s and 1970s. Its claim is that the implementation of rent controls would hurt the investment in new housing at a time when institutions are just beginning to invest once more and would move us further away from finding a solution to the root problem of a lack of supply. They contend that the market must be allowed to self-regulate and that limiting institutional involvement will result in worsening conditions in rental homes.

What about property investors? Landlords? 

While it would seem like a good idea to make it easier for tenants in the private rental sector to afford their housing, there are definitely gray areas. Many contend that in order to keep standards high in the industry, some of the higher costs incurred by landlords must be passed along to tenants.

Households that rent have been growing in number for a while now. Additionally, there are more adults renting homes alone, and the average age of first-time buyers is growing. Due to the pandemic, many individuals are also moving, and many choose to “test before you buy” by renting in an area they are thinking about.

To accommodate this demand, it is critical to ensure that new landlords continue to invest in the UK real estate market. The industry still ranks among the most alluring asset classes, especially given the increased demand from tenants and anticipated increases in home prices.

TAKEAWAY: 

Yes, rent control has more negative effects than positive ones. More landlords are needed

There is a good reason for policymakers to focus on this problem and create regulations that lessen the negative impacts of rapidly increasing rents. However, a crucial question is whether rent control is the best course of action to prevent rent inflation.

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